Business Studies Chapter 9 Notes NCERT Class 11th
9.1 Introduction to MSME
- Significance: MSMEs are vital for India’s development, linking production, employment, and exports. They foster entrepreneurship and use local resources.
- Economic Contribution: Contribute ~29.7% of GDP and ~49.66% of exports.
- Employment: Second-largest employer after agriculture, creating jobs for ~60 million people via 28.5 million enterprises.
- Role: Complement large industries, promote indigenous skills, innovation, and entrepreneurship.
- Product Range: Diverse, from consumer goods to high-precision products.
- Government Focus: Encouraged for self-reliance and rural industrialization.
- Subgroups: Includes eight subgroups; Khadi & Village Industries and Coir are key growth drivers.
- Global Partnerships: Sought by global companies for low-cost manufacturing and local skills.
9.2 Micro, Small and Medium Enterprises Definition
- Parameters: Defined by employment, capital investment, and business turnover.
- Government Definition: Based on investment in plant/machinery and turnover, considering India’s capital scarcity and labor abundance.
- Classification (Investment / Turnover):
- Micro: ≤ 1 Cr / ≤ 5 Cr
- Small: ≤ 10 Cr / ≤ 50 Cr
- Medium: ≤ 50 Cr / ≤ 250 Cr
- MSMED Act, 2006: Provides legal framework for definition, credit, marketing, and technology upgradation; covers medium enterprises and service entities.
- Village Industries: Rural industries producing goods/services, with per-head fixed capital set by government.
- Cottage Industries: Rural/traditional industries, not defined by capital investment criteria.
9.3 Role of MSME
- Distinct Position: Significant for India’s socio-economic development.
- Industrial Strategy: Integral to India’s industrial strategy.
- Socio-Economic Benefits: Prevents rural-urban migration, reduces income inequality, promotes dispersed industrial development, creates economic linkages.
- Accelerated Growth & Employment: Powerful tool for industrial growth and job creation in rural/backward areas.
- Contributions:
- Regional Development: 95% of industrial units, aiding balanced regional growth.
- Employment Generation: Labor-intensive, second-largest employer after agriculture.
- Product Diversity: Wide range from mass consumption to sophisticated and traditional goods.
- Decentralized Industrialization: Can be set up anywhere using local resources, spreading industrial benefits.
- Entrepreneurship Opportunities: Enables channeling latent skills into businesses with low capital.
- Low Production Cost: Competitive due to cheaper local resources and low overheads.
- Quick Decision-Making: Small size allows fast decisions for new business opportunities.
9.4 Problems Associated with MSME
- General Disadvantages: Suffer compared to large industries due to size and operations.
- Major Problems: Underdeveloped infrastructure, lack of managerial talent, poor quality, traditional technology, inadequate finance.
- Exporting Unit Problems: Inadequate market data, lack of intelligence, exchange rate issues, quality standards, pre-shipment finance.
- Specific Problems:
- Finance: Insufficient capital, poor creditworthiness, dependence on local lenders, inadequate working capital, collateral issues.
- Raw Materials: Procurement difficulties, quality compromise, high prices, limited storage, scarcity impact.
- Managerial Skills: Often single-person managed, lacking diverse skills (especially marketing), unable to afford professionals.
- Marketing: Weak area, leading to exploitation by middlemen; direct marketing difficult without infrastructure.
- Quality: Prioritize cost over quality, lack R&D/tech upgrades, weak in global competition.
- Capacity Utilization: Operate below capacity due to demand/marketing issues, increasing costs, leading to business sickness.
- Global Competition: Face strong competition from large industries and MNCs.
9.5 MSME and Entrepreneurship Development
- Entrepreneurship Definition: Process of establishing one’s own business (distinct from employment/profession); individual is entrepreneur, unit is enterprise.
- Economic Impact: Provides self-employment and expands job opportunities, crucial for national development.
- National Need: Essential for development (initiation in developing, sustenance in developed nations).
- Indian Context: Key for India’s economic power given shrinking formal employment and globalization opportunities.
- Characteristics of Entrepreneurship:
- Systematic Activity: Learned, step-by-step activity, not an inherent gift.
- Lawful & Purposeful: Aims for lawful business, creating value for profit and social gain.
- Innovation: Creativity and value creation; combines factors for societal needs, generates income/wealth. Includes new products, markets, tech, organization.
- Organization of Production: Mobilizes land, labor, capital, technology into productive enterprise; requires resource knowledge and negotiation.
- Risk-taking: Calculated risks; converts chances into success; avoids high (failure aversion) and low (unchallenging) risks. Personal stake.
9.6 Intellectual Property Rights (IPR)
- Growing Importance: Significant in global economic development over past two decades.
- Ubiquitous: Present in music, tech, designs, logos; products of human creativity.
- Definition of IPR: Legal rights on products of ideas, granted upon application.
- Ownership Rights: Owners can rent, give, or sell IP.
- Specific Definition: Creations of human mind: inventions, literary/artistic works, symbols, names, images, designs used in business.
- Categories:
- Industrial Property: Patents, trademarks, industrial designs, geographical indications.
- Copyrights: Literary and artistic works (novels, films, music, art).
- Intangible Nature: Distinct from other property, not physical.
- Evolving Scope: Constantly includes new forms like integrated circuits, plant varieties, semiconductor info.
- Recognized IPRs in India: Copyright, Trademark, GI, Patent, Design, Plant Variety, Semiconductor Integrated Circuit Layout Design.
- Traditional Knowledge (TK): Knowledge, systems, practices of local communities (e.g., Ayurveda); TKDL prevents wrongful patenting.
- Trade Secrets: Confidential info giving competitive edge (e.g., Coca-Cola recipe); protected under Indian Contract Act, 1872.
9.6.1 Why is IPR Important for Entrepreneurs?
- Encourages Innovation: Promotes new, groundbreaking inventions.
- Incentivizes Creators: Rewards inventors, authors, creators.
- Control & Income Protection: Allows creators to control work, preventing income loss.
- Recognition: Helps owners gain recognition for their works.
- Fosters Creativity & Economic Growth: Essential for national economic growth.
- Incentives for Investment: Encourages investment in R&D, marketing new tech/creative works.
- Global Business Opportunities: Facilitates global marketing and sales of IP.
- Competitive Edge for Startups: Critical for monetizing ideas and establishing market competitiveness.
9.6.2 Types of IPs
- Copyright:
- Definition: Right “not to copy” when original idea is expressed.
- Scope: Creators of literary, artistic, musical, sound recording, cinematographic films.
- Exclusive Right: Prohibits unauthorized use (reproduction, distribution).
- Automatic Protection: Arises upon creation.
- Registration: Not mandatory, but essential for exercising rights in infringement.
- Protected Works: Literary (books, computer programs), Artistic (drawings, logos), Dramatic (dance, screenplay), Musical, Sound Recording, Films.
- Trademark:
- Definition: Word/symbol identifying goods/services, differentiating from competitors.
- Purpose: Conveys company reputation, goodwill; prevents deceptive similarity.
- Categories: Conventional (words, logos), Non-Conventional (sound, dynamic marks).
- Registration: Not mandatory (Trademark Act 1999), but establishes exclusive rights.
- Geographical Indication (GI):
- Definition: Identifies products from specific territory due to quality/reputation from origin.
- Heritage Protection: Protects collective intellectual heritage.
- Categories: Agricultural, natural, handicrafts, manufactured goods, foodstuffs.
- Examples: Naga Mircha, Darjeeling Tea, Banaras Sarees.
- Growing Importance: Consumers value geographical origin.
- Patent:
- Definition: IPR protecting scientific inventions (products/processes) with technical advancement.
- Exclusive Right: Government-granted right to exclude others from making, using, selling, importing.
- Patentability Criteria: New, Non-obvious (Inventive Step), Capable of Industrial Application.
- Invention vs. Discovery: For inventions (novel creation), not discoveries (existing things).
- Non-Patentable: Scientific principles, natural laws, abstract theories, frivolous, immoral, agricultural methods, treatment, admixtures, TK, incremental inventions, atomic energy (Sections 3 & 4 of Patents Act, 1970).
- Temporary Monopoly: 20-year exclusive rights; enters public domain after.
- Purpose: Encourages scientific innovation.
- Design:
- Definition: Shape, pattern, lines, or color applied to articles; protects aesthetic appearance.
- Term: 10 years, renewable for 5; public domain after.
- Plant Variety:
- Definition: Grouping plants by botanical characteristics, bred by farmers.
- Purpose: Conserves, improves, provides plant genetic resources.
- Benefits: Promotes R&D, recognizes farmers, aids seed industry.
- Semiconductor Integrated Circuits Layout Design:
- Definition: Design of products with transistors/circuitry elements on semiconductor for electronic functions (e.g., computer chips).
Key Takeaways
- Continuous Innovation: Essential for businesses to avoid stagnation.
- Respect for IP: Ethical and legal necessity; fosters respect for one’s own IP.
- Startups and IPR: Crucial for monetizing ideas and market competitiveness in the growing startup ecosystem.